Business confidence in the Shoalhaven and Southern Highlands are reported to be lowest in NSW as costs, red tape and weak demand bite.
Businesses across the region are doing it tough, with new data showing confidence collapsing, costs outpacing demand and visitor spending sliding back into fragile, seasonal patterns.
The Q3 Business Conditions Survey reveals that while the Illawarra remains in line with state trends, business confidence in the Southern Highlands and Shoalhaven has slumped to -64.5 — the weakest in NSW, in stark contrast to the Illawarra and statewide results, still showing negative territory but improving with strongest results in the last three years.
Localis visitor economy data reinforces the trend: holiday peaks remain, but troughs are deeper than last year, showing the region is sliding back into heavier seasonality. The King’s Birthday long weekend — traditionally one of the most dependable periods for local operators — underperformed in the Highlands and Kiama–Shellharbour, while Shoalhaven’s spike faded quickly and Wollongong’s surges proved short-lived.
Businesses under pressure
· Rising costs: Operators across the corridor report payroll tax, workers’ compensation, rising wages and superannuation as unsustainable. In Shoalhaven, occupancy fell year-on-year despite average room rates rising nearly 30%, proving costs are outpacing demand.
· Red tape: Echoing Business NSW research, local businesses say compliance and regulation are stifling productivity — with red tape now the second-biggest challenge for NSW operators.
· Labour shortages: Accommodation and food services — the backbone of the visitor economy — continue to face severe staffing shortages, compounding pressures.
· Confidence gap: While NSW records growing confidence, the Highlands and Shoalhaven are being left behind, with the weakest readings in the state. Confidence rebound is uneven: Illawarra businesses report improving sentiment, but the Highlands and Shoalhaven saw confidence fall further this quarter, leaving them at the bottom of the state.
· Return to seasonality: Localis data shows holiday peaks remain, but off-season and mid-week periods are in some areas softer in some areas than pre-COVID and post-Black Summer benchmarks. This points to an increase in seasonality and an increasingly fragile visitor economy.
· Domestic softening, international substitution growth off a low base: Drive markets like Sydney, Canberra and Wollongong are weakening, while international segments (China, NZ, UK, USA) are rebounding from a small base.
Regional Data insights
· Southern Highlands: Visitor spend down ~13% YoY in June, with ACT visitation collapsing by more than half (-56%). The long weekend — normally a lifeline — failed to deliver, mirroring the collapse in confidence. Figures June 2025 against June 202year to date 2025 showing an ongoing downward trend for the sector which is very concerning.
· Shoalhaven: Spend up 8% YoY, supported by ACT (+62%) and international (+133%). Occupancy peaked at 68% on the long weekend, above 61% last year, but plunged below 20% by early September, leaving businesses exposed to deep troughs.
· Wollongong: Spend up slightly (+3% YoY), led by local visitors and a significant increase in international, although off a very small base (+27%). But ACT (-21%) and Queensland (-37%) visitation fell, leaving the city over-reliant on weekend events and international recovery, without a strong domestic base.
· Kiama–Shellharbour: Steady overall, but the long weekend underperformed compared to 2024. Gains came from ACT (+36%) and international, primarily driven by an increase in US visitation (+45%), leaving the economy reliant on a few source markets.
· Dapto–Port Kembla: Down -11% YoY, heavily dependent on neighbouring Wollongong and Kiama–Shellharbour; interstate and international negligible.
A call to government
Business Illawarra Director Coralie McCarthy said: “Businesses in our region are being stretched to breaking point. Costs are climbing, red tape is strangling productivity, and confidence in the Highlands and Shoalhaven is now the lowest in NSW. Holiday weekends might still bring some opportunity, but it’s not enough to keep the doors open year-round.”
“Government must take this seriously. That means real relief on payroll tax and workers’ compensation, cutting red tape that drains small business time and money, and targeted investment to drive mid-week and off-season visitation. Without urgent action, the cracks in our visitor economy will widen and more businesses will be at risk.” Ms McCarthy said.
“Business Illawarra calls for reinstatement of coordinated visitor economy promotion through the NSW State Government. “In the past there was a multi-million-dollar campaign that partnered local government from Wollongong to the boarder together to sell the South Coast and Highlands as one region, driving off season visitation. State government cuts have left this region without adequate promotion and coordinated support” Ms McCarthy said.
“Whilst we are happy to see a new Visitor Economy strategy released, it’s time to put some real funding behind the regions and take the visitor economy seriously” Ms McCarthy said.
Media Contact
Coralie McCarthy
Director, Business Illawarra
M: 0417 431 564
E Coralie@BusinessIllawarra.com
— ENDS —
About Business Illawarra
Business Illawarra is the region’s peak business organisation; a not-for-profit advocacy group dedicated to the economic development of the Illawarra, Shoalhaven and Southern Highlands. On behalf of our members, we develop policy and are the leading voice representing business across the region.
Business Illawarra is owned and supported by Business NSW, the state's leading advocacy voice for business across NSW. Of the few enduring, independent, not-for-profit organisations in Australia, Business NSW is the only one focused on the wellbeing of the business community. Our purpose has always been to provide a strong advocate to all levels of government on issues affecting businesses, undertake research to guide greater public and private sector investment in economic infrastructure, and support the development of workforce capacity and skills in our region.
Businesses across the region are doing it tough, with new data showing confidence collapsing, costs outpacing demand and visitor spending sliding back into fragile, seasonal patterns.
The Q3 Business Conditions Survey reveals that while the Illawarra remains in line with state trends, business confidence in the Southern Highlands and Shoalhaven has slumped to -64.5 — the weakest in NSW, in stark contrast to the Illawarra and statewide results, still showing negative territory but improving with strongest results in the last three years.
Localis visitor economy data reinforces the trend: holiday peaks remain, but troughs are deeper than last year, showing the region is sliding back into heavier seasonality. The King’s Birthday long weekend — traditionally one of the most dependable periods for local operators — underperformed in the Highlands and Kiama–Shellharbour, while Shoalhaven’s spike faded quickly and Wollongong’s surges proved short-lived.
Businesses under pressure
· Rising costs: Operators across the corridor report payroll tax, workers’ compensation, rising wages and superannuation as unsustainable. In Shoalhaven, occupancy fell year-on-year despite average room rates rising nearly 30%, proving costs are outpacing demand.
· Red tape: Echoing Business NSW research, local businesses say compliance and regulation are stifling productivity — with red tape now the second-biggest challenge for NSW operators.
· Labour shortages: Accommodation and food services — the backbone of the visitor economy — continue to face severe staffing shortages, compounding pressures.
· Confidence gap: While NSW records growing confidence, the Highlands and Shoalhaven are being left behind, with the weakest readings in the state. Confidence rebound is uneven: Illawarra businesses report improving sentiment, but the Highlands and Shoalhaven saw confidence fall further this quarter, leaving them at the bottom of the state.
· Return to seasonality: Localis data shows holiday peaks remain, but off-season and mid-week periods are in some areas softer in some areas than pre-COVID and post-Black Summer benchmarks. This points to an increase in seasonality and an increasingly fragile visitor economy.
· Domestic softening, international substitution growth off a low base: Drive markets like Sydney, Canberra and Wollongong are weakening, while international segments (China, NZ, UK, USA) are rebounding from a small base.
Regional Data insights
· Southern Highlands: Visitor spend down ~13% YoY in June, with ACT visitation collapsing by more than half (-56%). The long weekend — normally a lifeline — failed to deliver, mirroring the collapse in confidence. Figures June 2025 against June 202year to date 2025 showing an ongoing downward trend for the sector which is very concerning.
· Shoalhaven: Spend up 8% YoY, supported by ACT (+62%) and international (+133%). Occupancy peaked at 68% on the long weekend, above 61% last year, but plunged below 20% by early September, leaving businesses exposed to deep troughs.
· Wollongong: Spend up slightly (+3% YoY), led by local visitors and a significant increase in international, although off a very small base (+27%). But ACT (-21%) and Queensland (-37%) visitation fell, leaving the city over-reliant on weekend events and international recovery, without a strong domestic base.
· Kiama–Shellharbour: Steady overall, but the long weekend underperformed compared to 2024. Gains came from ACT (+36%) and international, primarily driven by an increase in US visitation (+45%), leaving the economy reliant on a few source markets.
· Dapto–Port Kembla: Down -11% YoY, heavily dependent on neighbouring Wollongong and Kiama–Shellharbour; interstate and international negligible.
A call to government
Business Illawarra Director Coralie McCarthy said: “Businesses in our region are being stretched to breaking point. Costs are climbing, red tape is strangling productivity, and confidence in the Highlands and Shoalhaven is now the lowest in NSW. Holiday weekends might still bring some opportunity, but it’s not enough to keep the doors open year-round.”
“Government must take this seriously. That means real relief on payroll tax and workers’ compensation, cutting red tape that drains small business time and money, and targeted investment to drive mid-week and off-season visitation. Without urgent action, the cracks in our visitor economy will widen and more businesses will be at risk.” Ms McCarthy said.
“Business Illawarra calls for reinstatement of coordinated visitor economy promotion through the NSW State Government. “In the past there was a multi-million-dollar campaign that partnered local government from Wollongong to the boarder together to sell the South Coast and Highlands as one region, driving off season visitation. State government cuts have left this region without adequate promotion and coordinated support” Ms McCarthy said.
“Whilst we are happy to see a new Visitor Economy strategy released, it’s time to put some real funding behind the regions and take the visitor economy seriously” Ms McCarthy said.
Media Contact
Coralie McCarthy
Director, Business Illawarra
M: 0417 431 564
E Coralie@BusinessIllawarra.com
— ENDS —
About Business Illawarra
Business Illawarra is the region’s peak business organisation; a not-for-profit advocacy group dedicated to the economic development of the Illawarra, Shoalhaven and Southern Highlands. On behalf of our members, we develop policy and are the leading voice representing business across the region.
Business Illawarra is owned and supported by Business NSW, the state's leading advocacy voice for business across NSW. Of the few enduring, independent, not-for-profit organisations in Australia, Business NSW is the only one focused on the wellbeing of the business community. Our purpose has always been to provide a strong advocate to all levels of government on issues affecting businesses, undertake research to guide greater public and private sector investment in economic infrastructure, and support the development of workforce capacity and skills in our region.